Horizons ETFs proposes new structure for derivative ETFs

By The IJ Staff | August 27 2019 11:30AM

In response to federal tax changes, Horizons ETFs Management (Canada) Inc. is proposing to reorganize a number of its existing exchange traded funds (ETFs), primarily those which use derivative arrangements to achieve their investment objectives. The proposed corporate class reorganization affects 44 of the company’s products.

“The decision to propose a corporate class structure follows an extensive review by Horizons ETFs of the activities and current tax positions of the relevant ETFs, along with the proposed changes to the Income Tax Act,” Horizons said in a statement on Friday. “Horizons ETFs has determined that it would be in the best interest of the unitholders of the relevant ETFs, currently structured as mutual fund trusts, to merge into a single multi-class mutual fund corporation.” Under the proposed reorganization, ETF units would be exchanged for a corresponding class of shares of a new mutual fund corporation. Horizons says the underlying ETF investment objectives, strategies and fees will not change.

“Even before the recent proposed changes to the taxation of mutual funds were announced, Horizons ETFs had been exploring the potential of a structural change for the majority of our synthetically-replicated index ETFs,” Steve Hawkins, Horizons’ president and CEO added in a statement announcing the proposed changes. “Based on our review of the regulatory environment, including the tax changes proposed in the recent Federal Budget, we feel confident that the proposed corporate class structure will allow us to continue to offer our synthetic ETFs to investors in a manner that provides unitholders with all of the same benefits that they have enjoyed.”

The complete list of affected funds can be found here.

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